preview

Caparo Industries Plc Vs Dickman Case Summary

Decent Essays

Citation Facts Judgment
Caparo Industries Plc v Dickman (1990) 2 AC 605 Caparo relied on the audited financial statements of a publicly listed company to purchase additional shares with a view to affecting a takeover. Caparo alleged the auditors (Touche Ross – now Deloitte) were negligent in certifying that the financial statements showed a true and fair view of the company’s position.
The issue before the House of Lords was whether the auditors owed a duty of care to individual shareholders. The House of Lords unanimously held that the auditors of a public company did not owe a duty of care to individual shareholders in a company or prospective shareholders.

Bridge LJ (at 618):
In addition to the foreseeability of damage, necessary ingredients …show more content…

If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice.

The judgments of Dawson J and Toohey & Gaudron JJ indicate that a duty of care in such cases requires a relationship of proximity between the plaintiff and defendant. Toohey and Gaudron JJ’s finding of no duty hinged on their view that Esanda did not need to rely on Peat Marwick’s audit and could have instead hired accountants itself to ascertain the borrower’s true financial position (at 289). This reasoning is difficult to apply to individual shareholders in a publicly listed company.
McHugh J at 282 held that the Australian law was correctly stated and applied in R Lowe Lippman (above). McHugh J also suggests that …show more content…

The HCA has unanimously held at 579 [49]:
What has been described as the three-stage approach of Lord Bridge of Harwich in Caparo Industries Plc v Dickman does not represent the law in Australia. Lord Bridge himself said that concepts of proximity and fairness lack the necessary precision to give them utility as practical tests, and “amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope”.
The judgment instead emphasises the importance of developing novel duties by reference to principles of general application (at [49]) and ensuring that any new duties imposed are consistent with parties’ existing obligations (at [60]).
The HCA did not make any comments on the correctness of the ultimate finding in Caparo that auditors did not owe individual shareholders a duty of

Get Access